Archive for the ‘Law’ Category

We Signed an Important Amicus Brief in Oracle v. Google Case

At Foundry Group, we take a strong interest in the policy and legal ecosystem that affects the start up industry.  We’ve been among the first to support initiatives like Startup Visa and patent reform and have been active in city, state and national politics in the hopes of keeping the U.S. the center of the startup world.

I’ve recently left the NVCA board after my four-year term was up.  During that time I took a particular interest in SOPA/PIPA (glad that blew up, but keep your eyes open, there are still folks out there trying) and I’m proud to say that the association has a permanent IT policy group that did not exist before I joined.  High on the list of issues going forward certainly will be around Cybersecurity and more patent reform.

Recently, our company signed onto an amicus brief that might be the most important issue that we’ve faced.  In short, Oracle is threatening to chill innovation in the software industry by arguing that APIs are copyrightable.  Google is the defendant and should Oracle win this case, the implications are disastrous for our startup ecosystem and our economy.

Thankfully the folks at the University of California, Berkeley, spearheaded by Jennifer Urban see this as a major threat as well and wrote a cogent and powerful amicus brief to the court.  The list of signatories to the brief are here and represent a wide constituency of the industry.

Thank you Jennifer and team for your tireless efforts.  Startup land:  please support and help recognize these important efforts.

 

May 31st, 2013     Categories: Entrepreneurship, Law, Venture Capital    

Calling All Angels – Fort Collins Version

Three keys to a building a strong ecosystem for startups are: (1) entrepreneurs; (2) technology; and (3) investors.   For a long time, newer entrepreneurial communities have relied on the first two segments to attract the third.  We are now realizing that to sustain and grow a vibrant entrepreneurial community, we need to support all three.

Angel investors are typically very bright, successful entrepreneurs who want to give back after they cash out in one or two of their own ventures.  Although they understand how to build products and companies, they may not have a lot of experience in taxes, financing, and investment.  One of the big areas that can come back to bite them later is taxes.

My friend, Roger Glovsky, along with EKS&H, the Rocky Mountain Innosphere, and Impact Angel Group are trying to shine a light on tax issues that may be critical for angel investors to understand, such as 83(b) elections, tax qualified stock options, and trading equity for services.  In addition, they will talk about tax loopholes for investors, the Colorado enterprise tax zone credit, and tax deductible philanthropic funds to support Colorado startups.

If you are in the Fort Collins area next week, be sure to sign up for this special event (free!) on May 31 at the Rocky Mountain Innosphere.

May 22nd, 2013     Categories: Financings, Law, Venture Capital    

It’s the Hours, not the Rate – Why Most People Focus on the Wrong Thing When Choosing a Lawyer

Given my background as a recovering lawyer, I’m often asked by portfolio companies, friends, other VCs, etc. for attorney referrals.  I don’t get asked too often on routine matters, but the really important “bet  the company” stuff where counsel selection is critical.  Fortunately, I’ve had the pleasure to work with a lot of good folks which soothes my inner zen master, as so many lawyers are average at best.

However, literally every discussion I have is similar to this:

Me: “Hey, you should check out X, Y and Z for what you need.”

Them: “I did, thanks for the recommendations.  They are all great, but X is $500 and hour, Y is $650 and hour and Z is $850 an hour.  Therefore we are going with X.”

Me: “You realize that hourly rate is largely irrelevant?”

Them: “Huh?”

And thus a discussion ensures on why hourly rates are largely irrelevant.  Why is this the case?  Simple math: Total Bill = Hourly Rate X Hours billed.

In all my years of auditing lawyer bills, it’s the hours that always stand out.  The hours, in any complex matter are what spiral out of control.  In these big issue situations (litigation, patent stuff, M&A, IPOs, etc.), the amount of hours that an efficient and creative lawyer will save you far, far outweigh whatever hourly rate they may charge.  In fact, the higher hourly rates seem to have little or no effect on overall lawyer bills as I look across multiple companies, it’s all about the knowledge, experience and efficiency.

One simple decision, for instance the decision to not file a particular motion, response, fight an irrelevant issue, etc., will impact the total fees way more than an hourly rate.

So when you are shopping, do your diligence on the creativity, efficiency and deep domain knowledge the lawyer has.  The amount of hours you will save far surpass any difference in rate.

(***Caveat:  This doesn’t pertain to simple matters like company formation, typical venture financings, etc.  Also, at some point hourly rates DO matter, but I’m thinking of a lawyer who is  $1000 an hour and I would stake my reputation that his overall bills are lower than any of his peers for similar matters.)

January 20th, 2013     Categories: Law, Venture Capital    

Sympoz Launches Programs on Starting Companies

One of our portfolio companies, Sympoz has announced the launch of their programs targeting startup entrepreneurs.  Even better, the series stars some of my favorite people in startup land:  my partner Brad Feld, along with Brad Bernthal of the University of Colorado Law School and Mike Platt , partner at Cooley LLP.  We teach you everything that we know in this comprehensive video series.

Thinking about doing your first startup? Perhaps you’re a startup veteran, who has the bumps and bruises to prove it, looking to jump back in?

Let us help you maximize the opportunity and do it right.

Brad’s class, How To Light a Spark & Set Your Startup on Fire, is FREE for a limited time.  Brad has lived the startup story over and over. He offers straight-shooting advice: Does your idea have market potential? Is it the right idea for you? Brad’s raw and pragmatic advice will lead you to consider the competition, examine your motivation and be honest about your level of passion and commitment.

Brad Bernthal and I, who have for several years taught an oversubscribed course at the CU Boulder Law School, are joined by Mike in teaching, The Nuts and Bolts of Starting a Company. In this class, which includes over 4 hours of instruction for just $29.99, we join forces to teach you things your lawyer and venture capitalist may not want you to know. How to turn an idea into a company. Who to partner with. How to seek out money and what to do with it when you get it. You’ll learn what to put in your pitch deck, what not to say to a VC, and 15 common mistakes that will kill your startup before it gets off the ground.  And a lot, lot more…

For those of you who have read Venture Deals, consider this a great summary of some topics in the book, but more heavy on the business side of equation, with the benefits of interactivity between you and the instructors.

Sympoz classes are perfect for busy people; you can watch the professionally produced, HD videos anytime, anywhere on the planet, from any Internet-connected device, as often as you want. The Sympoz learning platform seamlessly blends discussions into the class experience, enabling you to ask questions of, and participate in conversations with your class community, including your instructors.

So, what are you waiting for? Join us in class!

How LexisNexis Martindale-Hubbel are Running a Lawyer Ratings Scam

I am deeply disgusted to report that the good name of LexisNexis Martindale-Hubbel is officially worthless.  This institution which has built its reputation on providing accurate information to lawyers and the general public about lawyers is now nothing more than a marketing organization.  Their ratings can not be trusted.  How do I know?  Simple, they recently rated me as an outstanding lawyer as rated by my clients.

I haven’t had clients since July 2000.  And unless my three partners are secretly spending time rating my services (they aren’t) then this is complete and utter bullshit.  So beware consumers and fellow attorneys:  these ratings are nothing more than a scam to sell expensive plaques and foist the “ratings” on a public who might be looking for competent legal counsel.

Here was the text from the email:


Client Distinction Award
Congratulations Jason A. Mendelson,You have earned the Client Distinction Award. This honor has been made possible by your clients who have taken the time to compliment you in the following areas:

Communications Ability
Responsiveness
Quality of Service
Value for Money

The results have been compiled and you have earned a Client Review Rating Score of 4.5 or higher on a scale of 1-5. Less than 4% of the 900,000+ attorneys listed onmartindale.com and lawyers.com have been accorded this Martindale-Hubbell honor of distinction.

A commemorative wall plaque has been designed for you in honor of this new selection by your clients. Display your Client Distinction Award Plaque for them to see (especially new and potential clients). It serves as a point of reference which tells them others have confidence in your work.Ordering is easy. To preview and customize your award click here. (I embedded the image)

Or, take advantage of our easy open invoice billing. Simply reply to this email to tell us how many plaques you would like and we will ship and invoice you later for $159 + $12.90 shipping per plaque (net 20 terms).

Please do not hesitate to call or email me with any questions. I am available from 9am to 6pm EST, Monday through Friday and would be happy to walk you through the simple steps of customizing your wall plaque.

Congratulations,

Pat Barnes
Account Manager
American Registry, LLC

*Did you know? Nearly 6 in 10 consumers seeking an attorney in the past year checked ratings and online reviews; of those, 65% say ratings and reviews were influential in their decision process.

 

And there you have it. Even the last tagline is talking about how the ratings are important to consumers. Vomit.

October 5th, 2012     Categories: Frustrations, Law    

Why is Everyone Hatin’ on Form D?

More and more I’ve been hearing about companies not filing Form D’s in conjunction with their financings.  The reason:  We don’t want the press picking up on our fundraising / we want to control the message / we are stealth, etc.

This post isn’t about the value of being stealth.  I’ve always thought stealth mode is a little silly.  After all, a startup’s best indication of success is the people that it puts together, but like I said – to each his own.

What this post is about is why I think people should still file Form D’s despite many law firms saying “eh, don’t worry about it.”  I’ll go all lawyer on y’all for a moment.

Regulation D requires a filing, but per Rule 507, if you don’t file it, doesn’t eliminate your ability to rely on RegD for the financing.   Therefore a company that wants to be stealth and elects against the advice not to file the Form D is violating an SEC rule, but it doesn’t jeopardize the offering exemption.    4(2) always exists, but that is factual, and in these very early rounds you may have small angels or others who are tricky.

My sense is that some law firms are loose and cite 4(2), so that VCs have come to believe that it doesn’t really matter whether you file the Form D.

The SEC has not gone after anyone yet (but could), but as some of you may recall the S-1 (IPO filing document) requires disclosure of what exemption you relied upon (and I have heard of current situations in which the SEC was really reading this section closely which isn’t surprising in this era of SecondMarket), so a company that doesn’t file the Form D has to decide how they disclose what they did, and risk more SEC questions.

Note, you no longer need to list the names of the investors in the Form D, so it is less of an issue to file it.  Even if a company doesn’t promptly file, once they have announced the round publicly I would recommend that they then file theForm D.

Note also that if a public acquirer is picking up your company, they are, too, going to go through each financing with a fine tooth comb.

Bottom line:  seems like little value for a potential problem later that you don’t need.  Suck it up and file the D’s and keep all of our reporter friends happy at the same time.

August 13th, 2012     Categories: Financings, Law, Uncategorized    

Outside Counsel Attendance At Board Meetings

I’ve been thinking a lot recently about lawyer attendance at board meetings.  Normally, most venture-focused law firms attend board meetings free of charge.  And like most things in life, people value things by how much they pay for them.  (If you don’t believe me, check out the healthcare and education industries, to name a few).

This isn’t to mean that I don’t value counsel’s opinions on the company, rather, many times I feel badly for the attorney who is sitting in an hours long board meeting while I know (from my past life) that they have many other clients needing their help, all along the while they are bored and sneaking in peeks of their Blackberry*

It’s time to be more considerate to our lawyers who are already volunteering their time.  Effective immediately, I’m going to recommend to all the companies that I’m involved with to take the following approach to board meeting agendas.

1. Start with a 5-15 minute overview of the company.  This is a quick status update, quick financial update, the “good, bad and ugly” and what agenda topics the CEO wants to talk about with the board.  This will give the lawyer (and the board) a backdrop to which have all other conversations;

2. Then immediately jump into the administrative stuff like option grants, approvals, etc.  If there are any legal issues out there, discuss them upfront;

3. Then let the lawyer go if he / she wants.  If they want to stick around, by all means they are invited to, but if they have better things to do, then so be it.  We get it.  It’s not a secret that we aren’t their  only client.  If we were, we wouldn’t want them as our lawyer; and

4. Business / strategy part of the board section.  If any legal issues come up, we can loop back in the lawyer later.

Note that with the quick hit summary upfront, a properly skilled and attentive lawyer may determine that they should stick around for other parts of the discussion.  That is absolutely cool.  Also, on some of my boards, the lawyers have become valuable business advisors, so this idea might not actually change the way they do business, but for the majority of folks I think this will have a positive impact.

I’ve done this recently at a couple of board meetings and each time, the lawyer has sent me a thank you note.  And my belief is that most of the good lawyer folks out there will remember who treats their time with respect and when push comes to shove will try extra hard for the clients they like the most.  In short, everyone wins.

(*  Yes, Blackberry.  Still not sure how y’all deal with that crummy piece of hardware, but good luck with that).

June 18th, 2012     Categories: Company Running, Law, Venture Capital    

A Recipe for Disaster – Killing Law Schools in Favor of an Undergraduate Education

The Wall Street Journal published an article today called “First Thing We Do, Let’s Kill All the Law Schools.”  The basic premise is that the costs are outweighing the benefits.  The authors claim that the total cost of going to law school is around $275,000 which leads to higher legal fees to citizens as it constrains supply of lawyers and those who do graduate must charge high hourly rates to repay their student loans.  The solution according to the article?  Kill all the law schools and make it an undergraduate level program. While I agree that the costs of law school have gotten out of hand in comparison to the real opportunities post graduation for many students, this article is wrong on a number of its conclusions.

First, to suggest that there is a supply constrain on lawyers is laughable.  Whether I’m wearing my client hat where I hire lawyers, or my professor hat (I am an adjunct professor at the University of Colorado), there aren’t nearly enough jobs to place all the lawyers this country is graduating.  In fact, the amount of applications to law schools has been INCREASING over the past few years and this is despite the costs going up and the number of jobs going down.  I’m shocked that the authors, one of whom is a professor and another an attorney at a large law firm don’t see these trends.  Perhaps given the rankings of their institutions these realities don’t effect them, but to the rest of us, it’s quite apparent that the system doesn’t suffer from a lack of supply.

Secondly, the idea that one can train good lawyers out of an undergraduate program is misguided.  Clients pay lawyers for judgment, first and foremost.  It isn’t about wrote laws and rules, but rather, whom do you trust to be mature and wise enough to help you with your issues.  I’ve always thought that law schools do a disservice by allowing students to go straight from undergraduate school to law, when they should be copying the business school model of pressuring prospective students to have real-life work experience before attending a graduate program.  As both a client, a professor and former attorney, I believe that on average, those who have some real life experience are better suited to attend law school and become lawyers.  In any event, I can’t imagine wanting to pay for a 21 year old recently-graduated lawyer.  What experience in life do they really have?  Even if a student goes straight though, at least they are 25 years which is a different world than post undergraduate.

The authors talk about paid apprenticeships, but this still doesn’t get around the problem that lawyers would then have no work experience outside of the law.  Simply put, I don’t believe the average graduate has enough maturity to be a lawyer.

The authors also put for thehe concept that we would still have JD programs alongside undergraduate programs.  This makes no sense to me.  At best, we create a two class legal system between the “haves and have nots” and at the end, I don’t see market economics (price) differentiating, rather some folks will get good legal services and others will not.  Passing the bar exam doesn’t mean one is ready to be a lawyer.

Finally, the $275,000 is based on the assumption that actual school costs $150,000 and that with opportunity costs for “bright students with attractive career opportunities” the number, fully loaded is $275,000.  I would have stopped at the $150,000.  yes, that number alone is too high, but the rest is a complete fudge factor guess.  As previously mentioned, many students (maybe most) don’t have a better option than going to law school and thus the opportunity costs are a made up number.

I do applaud their ideas that a legal education should be more well rounded.  At CU, we are actively engaged at trying to bring more diverse subject matter into the classroom.  This is a key for going forward legal education.

In short, I agree with the problem, but the solution doesn’t work here.

January 17th, 2012     Categories: Education, Law, Law Firm 2.0    

University of Colorado Law School is Hiring

As Dean Phil Weiser develops Colorado Law and meets the opportunities and challenges ahead for legal education, he is building his team with a number of positions open.  If you are interested, or know great candidates who are, they can reach out to Phil directly (phil.weiser@colorado.edu) and read more below:

An Academic Entrepreneur to Build New Programs  – Director of Special Projects

(www.jobsatcu.com/applicants/Central?quickFind=66002)

The position of Director of Strategy and Special Projects is established to oversee and execute a variety of projects designed to support the Dean of Law’s broader strategic goals for the continued growth and transformation of legal education and its delivery through new opportunities. Representative projects includedevelopment of a road-map of the Dean’s strategic initiatives, identification of new market opportunities, and projects related to innovative business ideas.

A Communicator Who Can Tell The Colorado Law Story– Director of Communications and Public Relations:

(www.jobsatcu.com/applicants/Central?quickFind=67004)

The Director of Communications and Public Relations is responsible for improving and expanding written and electronic communication within the Law School and for developing/ maintaining a public-relations program for the Law School. The Director will further serve to develop and implement an aggressive strategy to use traditional and innovative media work with the External Affairs team inorder to communicate the Law School’s research, teaching, and service excellence to external audiences. The Director is a full-time professional exempt employee reporting to the Dean.

 A Techie Who Can Leverage Technology for Colorado Law, including redoing the website, developing distance learning, and overseeing all IT (Director of Information Technology:

(Posting to appear soon on the Jobs at CU webpage: https://www.jobsatcu.com/ )

The Colorado Law Director of Information Technology oversees all technology-related responsibilities and efforts for the University of Colorado Law School.

And two posts that can help bring donors to the table to support all of the exciting things happening at Colorado Law

Senior Director of Development

(http://www.cufund.org/jobs/employment-opportunities/available-positions/senior-director-of-development-%e2%80%93-ucb-law-school/)

Designs, directs and implements development activities for the Law School within the institution; works directly with dean of the Law School; responsible for planning, implementing, and coordinating all fundraising activities for designated program; manages several (3 or more) development professionals. Usually minimum of 8 – 10 years fundraising experience required. (Significant gifts of at least $100K plus manages development officers)

Assistant Director of Development

(http://www.cufund.org/jobs/employment-opportunities/available-positions/assistant-director-of-development-%e2%80%93-ucb-law-school/)

Entry level professional, with minimum of 1 – 3 years fundraising, sales, or public relations experience. Focuses on development of relationships with CU alumni and other donors in the $25K$75K category. Typically handles mid-level, moderately complex gift prospects, with the intent of cultivating sustainable and increasing donor relationship.

December 2nd, 2011     Categories: Entrepreneurship, Law    

Law Firms Invent New Recipe For Disaster

Recently, the New York Times published an article called At Well-Paying Law Firms, a Low-Paid Corner. In short, the paper is reporting that some very well known firms are hiring lawyers at cut rate prices (less than half) of what associates on partner track are making at the firm. And these cheaper resources are performing the same services as their partner-track colleagues. This feels like a recipe for disaster to me.

I’ve known a few people who have positions like this at firms. Their names and the firms they work for will remain nameless, however in this post. In each case, the lack of transparency of how this arrangement really bothers me as a client.

First, how do the firms determine which work gets assigned to which group of associates? And does it differ depending on how busy the firm is? If I hire a firm to represent me in a financing, are the folks doing the diligence (which really is the most important part of a financing, not the documentation) sometimes partner-track folks and other times not? Do the clients have a right to decide?

And how are the firms billing out for these lower-cost resources? If they bill the same, it feels like I’m getting ripped off. If they bill less, then my bill will reflect that I’m be represented by the lower-paid people. While I think many junior associates aren’t worth what they are paid (but it catches up later), one does normally get what one pays for. I refuse to believe there is no quality difference in an associate making $160,000+ and one making $60,000.

I worry about mentorship and training, too. What incentive does a firm have to really train folks that aren’t on partner track and might not stick around long term?

Lastly, I would propose the theory that camaraderie is important to the concept of the law firm. Clients hire partners at law firms, but also the firms themselves. This includes the firm culture and the knowledge that client teams traditionally are near each other physically, not in outpost office where some lawyers are making less than have of their other colleagues.

While the reason for this shift was to help with escalating billing rates, I’m still perplexed why lawyers and accountants are the only professions that every year raise their rates. It doesn’t fit with the rest of the economy or their clients. Perhaps instead of creating a group of second-class citizens within the firm, they should pay attention to some of the things I prescribed in my law firm 2.0 series.

May 24th, 2011     Categories: Law, Law Firm 2.0